Qantas CEO Responds to Misleading Reports

Sydney, 20 December 2006

The Chief Executive Officer of Qantas Airways, Mr Geoff Dixon, said today that much of the speculation and comment surrounding the proposed takeover of Qantas was wrong and, in some cases, deliberately misleading.

Mr Dixon said that any proposed ownership change for Qantas needed informed debate and needed to take into account the market in which Qantas operated.

"The international aviation market is grossly distorted by government ownership and financial support for airlines and airports.

"In this context, Qantas is one of the least protected airlines in the world and it is fanciful in the extreme to suggest otherwise.

"It is also laughable to see some editorial writers and commentators, in particular, calling for more competition for Qantas from city states and countries that skew all their aviation assets for national purposes," he said.

Mr Dixon said many of those making near hysterical statements now were the same people who had opposed just about every change Qantas had made since privatisation 11 years ago.

"They are, of course, supported by the usual gaggle of monopoly airport providers in Australia and the government owned and supported carriers such as Singapore Airlines.

"If Qantas had not fought for its position against such blatant self interest and if we had not changed work practices, attacked inefficiencies and invested billions of dollars on product and service, we would be a much diminished airline now and Australia would be much the poorer for it," he said.

Mr Dixon said Qantas had for many years and, increasingly so since its privatisation, maintained a "social compact" with the Australian community.

This had, among many things, involved:* Qantas and government working together to achieve balanced outcomes for Australia in the regulatory system that provided market access for airlines worldwide;* Qantas making significant compromises in restructuring its various businesses to keep jobs in Australia; * Qantas providing extensive financial, operational and people resources in times of crisis, from Cyclone Tracy some 32 years ago to the collapse of Ansett, the Bali bombings and the Asian tsunami in more recent times; and* Qantas support, year in and year out, for large and small charitable, cultural and sporting organisations.

Mr Dixon said this sense of responsibility to Australia was a core part of Qantas' DNA and would not change under what would remain majority Australian ownership if the bid for Qantas by Airline Partners Australia was successful.

"We acknowledge that Qantas' iconic status means people, in particular legislators and regulators in Canberra, have a genuine interest in the leadership and future of the company.

"This genuine interest should not be overshadowed by the noise from the self-interested and ill-informed," he said.

Mr Dixon said it was important to put some facts on record about the misleading speculation on the following issues:

"It will continue to be Australia's national carrier and one of the primary ambassadors for the country overseas. It is completely wrong to suggest that would change."

Open Skies

Mr Dixon said the call for Open Skies by Brisbane and Melbourne Airports and certain government owned and supported competitors was breathtaking in its hypocrisy. It ignored the realities of the situation, namely:

* The most protected and privileged positions in Australian aviation are held by the unregulated monopoly airports that have increased charges by between 50 per cent and 228 per cent over the past six years.

* As revealed in the Productivity Commission's recent review of price regulation of airport services, charges in Brisbane in 2005 exceeded those of airports such as Bangkok, Singapore, Hong Kong, Kuala Lumpur and Dubai where Qantas' major international hub-based competitors reside.

* Since 2000, the Qantas Group has increased international seats departing from Brisbane by 73 per cent and from Melbourne by 24 per cent.

* The aviation policy settings that the Australian Government announced in February this year, including the decision to not allow Singapore Airlines access to the trans-Pacific route, weighed the interests of consumers, exporters, tourism stakeholders and foreign airlines and the economic and strategic benefits flowing from an Australia-based aviation industry.

* Australia is already one of the most liberalised aviation markets in the world, with 43 international carriers flying in and out each week.

* All United States airlines can seek to operate on the trans-Pacific route. Four airlines are expected to be providing direct services between Australia and the US within two years and four more already providing one-stop services - hardly the protected route that some people like to suggest.

* Open Skies is a distant goal in an industry that continues to operate under a bilateral air rights system, and Australia cannot unilaterally establish global open skies.

* Qantas is not allowed to fly on many routes including Shanghai-London and New York-London. It is capacity constrained on many more routes, including Singapore-Paris, and Hong Kong-London.

"Rather than blaming Qantas for the shortcomings of their airports, Brisbane and Melbourne Airports would be better placed to attract customers by offering more attractive prices and improving their current service standards," Mr Dixon said.

Sydney Airport

Mr Dixon said the suggestion that Qantas might get favourable treatment from Sydney Airport due to the less than 15 per cent equity stake Macquarie Bank would hold in Qantas under APA's proposal was wrong.

"From our experience the owners of Sydney Airport, including various Macquarie infrastructure funds, are solely interested in the performance of the Airport and not its major client, Qantas. This will not change due to Macquarie Bank's limited interest in Qantas," he said.

"This position is very different to that of our hub-based competitors in Singapore, Dubai, Bangkok and Kuala Lumpur where the Government owns both the Airport and the Airline.

"Our approach to dealing with the unregulated monopoly airports, including Sydney Airport, will not change as a result of the proposed transaction. Sydney Airport is currently seeking special leave to appeal to the High Court to overturn the declaration of domestic aeronautical services under Part iiiA of the Trade Practices Act. Qantas will again vigorously argue that Sydney Airport should be declared at the High Court."

Restructuring

Mr Dixon said Qantas could not stand still as competitors around the globe aggressively restructured their businesses.

"United States legacy carriers are transforming their cost structures under Chapter 11 bankruptcy protection, consolidation is also occurring at pace in the United States, Europe and parts of Asia, and many hub airlines enjoy the benefits of direct and indirect government support, including common ownership of airlines and airports," he said.

"We do not have some of the structural advantages that our competitors do, so we must continually reinvigorate our business within our regulatory and policy framework to ensure we remain competitive.

"Change has always been - and will continue to be - critical to Qantas' success.

"Our track record of outstanding customer service, investment and growth speaks for itself."

Frequent Flyer Program

"The Frequent Flyer Program is a strong, viable program prized by our most valuable customers and a critical contributor to the company's success," Mr Dixon said.

"Some people are trying to draw a parallel between a change of ownership of Qantas and Ansett's collapse. That is wrong - we are not broke and we will not go broke.

"We will not take people's points away from them. It is in our interests to make sure the Program is as strong as it can be.

"Like any area of our business, we will continue to review the program to make sure it is providing benefits that our customers want and operating well for us - that is no different to what we have done for many years."

Full Service

"Our full service operations, under the Qantas brand, are a key driver of the Group's profitability, with excellent positions in the domestic market and in key international markets," Mr Dixon said.

"As we have stated repeatedly, our two-brand strategy is about ensuring a strong future for our full service brand, while adding a value-based airline that is better suited to some markets.

"Qantas is one of the world's leading premium carriers, ranked number two globally for customer service for the past two years in the benchmark Skytrax customer survey. We have achieved this because we have continued to invest in the business through one of the more turbulent periods in aviation history."

"QantasLink has invested in new, larger aircraft, providing a 17.5 per cent increase in capacity last year with further growth this year.

"We are committed to regional Australia."

Jetstar

"Jetstar is the only value-based model established by a full service airline to have reported profits for two straight years since start-up. Last month, it became the first long haul international value-based airline," Mr Dixon said.

"We are aggressively expanding Jetstar to provide profitable growth in markets that are not economic with the Qantas product and cost structure."

Engineering

"We have undertaken an extensive review of our engineering operations over the past year, with the aim of achieving globally competitive costs and efficiency," Mr Dixon said.

"Rather than take the easy option of moving large parts of our maintenance activities offshore, we are well advanced on strategies to restructure our wide-body and narrow-body heavy maintenance operations within Australia and have already moved closer to world best practice efficiency.

"This maintains a skilled jobs in Australia.

"If we get this right, we will have the opportunity to bring maintenance of aircraft that are now offshore back onshore."

Defence

Qantas' commitment to ongoing cooperation and support (when requested) to the Australian Defence Forces is total, ongoing, and always will be.